@brasil61 over on Finz.tv posted a good article today about discipline. And I read it about two hours too late.
My approach is more akin to enjoyable surfing or fishing.. not competitive surfing or fishing. Enjoyable, relaxed wait for the exact perfect moment type surfing…nothing to prove..and if the ocean’s flat ..fine …waiting…waiting ..waiting…more waiting..and then… here comes my wave ..time to play.
Since I had to take the day off, this morning I thought I’d make a quick buck on $C weakness and short a falling knife at 5.11. Bad idea. In about 5 minutes I was down a couple of hundred bucks and losing more, fast. Since by nature I swing trade (primarily intraday), I typically have a much wider tolerance for giving losers a little slack to recover. But not on this one. I heeded the advice I’d heard once to not chase your mistakes and address them as soon as you make them, and ended up taking the couple of hundred dollar loss by covering at 5.38. As $C kept rising throughout the day, I avoided what might have later been a four-figure loss.
Instead of surfing, I was trying to water ski off a submarine.
And the failure is that I went against type. My style is to a) do quite a bit of analysis and triangulation on a position when the market is closed, b) bid out of the money and let 8 trades go by for every one that fills, c) let temporary losses run on a long leash unless evidence accrues that my analysis is wrong, d) stay small, and e) sell for modest gains.
In this trade, I did just about everything wrong. While I think $C is weak and the analysis of “C to 3″ may be good, the day trade bid out of the money meant I was catching a flying knife. I didn’t really stay small because I was looking for a quick gain. Because I wasn’t small, the leash got short.
A better play, and one that would have been more my style, would have been to check the pre-market numbers this morning and saw that the high-of-day was 5.60, then placed a short trade at 5.80 or 6, and give it a week or two. Sure, I might have missed it, like I did Monday with my bids on FAZ at 42, missing out on a quick 15% gain. But the success I have had this year has come from a good idea combined with the discipline of getting my price.
Later, I almost made a similar mistake jumping into FAZ, but recalled the hot stove and withdrew the trade in time.
Until I learn a lot more, that’s what I need to do: stick to my comfort zone, and learn (inexpensively) from small forays outside of it. And to enjoy my days off more.
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